George Osborne has pledged he will not go soft on austerity as he redoubled
the Government's commitment to cuts in the face of faltering UK growth and
turmoil in the markets.

Facing a clamour of voices urging him to slow the £110bn, five-year consolidation programme to stimulate the recovery, the Chancellor said: "Ours is an absolutely unwavering commitment to fiscal responsibility and deficit reduction.

"Abandoning that commitment would plunge Britain into the financial whirlpool of a sovereign debt crisis, at the cost of many thousands of jobs. We will not make that mistake... We will stick to our plan."

Pressure for the Chancellor to ease the programme has been growing in recent weeks, with London Mayor Boris Johnson arguing for a reduction in the 50p tax rate as well as, following the riots, scrapping cuts to the police.

Nine out of 10 Conservative party members also want some sort of tax reduction, according to a ConservativeHome survey.

Weak growth in the UK has been fuelling the rebellion against Britain's toughest fiscal squeeze since the Second World War.

On Wednesday, the Bank of England cut its forecast for this year from 1.8pc to 1.5pc and warned that the "headwinds to world and domestic growth... are becoming stronger by the day".

However, in a triumphalist speech during an emergency session of Parliament yesterday called to address the riots, Mr Osborne claimed the sovereign debt crisis in Europe as well as the US credit rating downgrade "completely vindicate" the Government's tough, early decision "to get ahead of the curve".

Britain's borrowing costs have fallen to their lowest level in over a century as the country has become a "safe haven in the global debt storm", the Chancellor claimed. "This is a huge vote of confidence ... and a reminder of the reckless folly of those who said we were going too far, too fast."

"Surely we have now learnt that growth cannot come from yet more government spending? Those who spent the last year telling us to follow the American example with more fiscal stimulus need to answer this simple question: why has the US economy grown more slowly than the UK's so far this year?"

Erik Britton, an economist at Fathom Consulting, said: "The Chancellor is saying he does not even want to countenance Plan B. I think markets will take confidence, but the real test may still be coming."

Addressing MPs, the Chancellor also:

• conceded that Britain's recovery will be "longer and harder" than hoped;

• confirmed that the authorities have "well rehearsed contingency plans" in place to deal with a fresh financial crisis;

• urged European countries to address their ballooning deficits more forcefully and bolster their banks;

• demanded greater political co-operation to deal with the world's dangerous imbalances.

Following a series of downgrades to Britain's growth, and a warning of one by the UK's official forecaster, the Office for Budget Responsibility, Mr Osborne admitted the recovery is faltering. "The whole world now realises that the huge overhang of debt means that the recovery will take longer and be harder than had been hoped," he said.

The recent collapse in global stock markets, which has wiped about £200bn off the value of UK shares, has been a result of "markets waking up to this fact".

Business groups called on the Chancellor to take radical steps to stimulate demand. Steve Radley, director of policy at EEF, the manufacturers' organisation, said: "The Government must maintain a relentless focus on sweeping away the barriers to growth, investment and jobs."

The Chancellor, who is due to unveil further growth plans this autumn, accepted "there is much more we can do – much more that we must do".

Weak growth and nervous markets have made "this the most dangerous time for the global economy since 2008", Mr Osborne warned. But both the Bank of England and the Financial Services Authority are confident that "British banks are sufficiently well capitalised and are holding enough liquidity to cope with the current market turbulence". The Government has "in place well developed and well rehearsed contingency plans", he added.

Ed Balls, the Shadow Chancellor, continued to press for a slower pace of consolidation. "Families will hear your talk of 'safe havens' and conclude you are in complete denial about what is going on in our country," he said. "We do need a tough, medium-term plan to get our deficit down ... But it is your reckless policies, too far and too fast, that have ripped out the foundation of the house and left our economy deeply exposed to this brewing global hurricane."